NewsWatch: 2-27-99

CBS.MarketWatch.com

Techs take a cold bath

NEW YORK (CBS.MW) -- Cautionary analyst remarks on a pair of marquee-name technology stocks reverberated up and down the technology corridor Friday, with many computer-related names closing waist-deep in the red. "The fly in the ointment is the downgrade of Compaq and Micron which trounced the techs today," said Jeff Cooper, head of Cooper Trading. Despite the bloodletting in the technology complex, losses elsewhere were mild, comforting many players. The broader market performed better than a Dow off 23 points, while volume was below average for the 13th day. "Without the bruising in the techs, I think the market would have been up strongly," Cooper said. "The techs are the only thing that got beat up. Indeed, losses in its two technology components, Hewlett-Packard and International Business Machines, accounted for more than one-half of the Dow Jones Industrial Average's
DJIA, -0.91%
loss of 59.76 points, or 0.6 percent, to 9,306.58. The Nasdaq Composite
$compq
was off 1.7 percent.

NEW YORK (CBS.MW) -- The Nasdaq is "up for the challenge" posed by a possible invasion of its turf by the New York Stock Exchange, a key Nasdaq official said Friday. Nasdaq Chairman and CEO Frank G. Zarb called on the New York Stock Exchange to remove rules that keep Big Board stocks from trading on the tech-oriented exchange. His comments followed a Wall Street Journal report that the NYSE is exploring ways to trade its rival's biggest stocks on the Big Board. "We have no way of knowing the accuracy of stories suggesting that the NYSE is considering competing directly with the Nasdaq to trade Nasdaq stocks," Zarb said. "If these stories are correct, we are up to the challenge." The NYSE declined to comment on Zarb's comment or the report.

SALT LAKE CITY (CBS.MW) -- Internet shares will likely be in play next week as about 400 money managers are scheduled to attend the Hambrecht & Quist "Planet.Wall.Street" conference. The fourth annual Internet investment gathering put on by the San Francisco-based boutique bank opens Monday with a keynote from Bob Davis, chief executive at Lycos (LCOS)
lcos
. The second-largest Internet search engine reported a narrower-than-expected loss on Thursday. See related story. In what promises to be one of the more interesting sessions of the conference, Davis and CMGI head David Wetherell sit together on a panel titled, "Let?s Make a Deal."

WASHINGTON (CBS.MW) -- Investors will test their fears against some hard data in the coming week. Two big reports will help them decide if the U.S. economy really is going too fast for comfort. "The main event is going to be the payrolls report" on Friday, said Joe Abate, economist at Lehman Brothers. "The economic data has returned to the forefront after [Federal Reserve Chairman Alan] Greenspan's testimony." The other big report will come Monday morning when the National Association of Purchasing Management releases its February index of conditions in the manufacturing sector. "You might get some indications that manufacturing is coming back," said Robert Dederick, chief economist at Northern Trust. "It'll be an exciting week, with lots of numbers," said Irwin Kellner, chief economist at CBS.MarketWatch.com and the Weller professor of economics at Hofstra University. See Other data in the week includes new home sales, personal income and spending, construction spending and factory orders. Each

WASHINGTON (CBS.MW) -- The U.S. economy grew at its fastest rate in 2 1/2 years in the fourth quarter while inflation hovered at 39-year lows, the Commerce Department said Friday. The gross domestic product rose at an annual rate of 6.1 percent in the fourth quarter, 0.5 percentage points higher than the first estimate of 5.6 percent released a month ago. The GDP price deflator -- a key gauge of inflation throughout the economy -- rose just 0.7 percent in the fourth quarter, the lowest since the fall of 1959. In the third quarter, GDP rose 3.7 percent and the price deflator rose 1 percent. For all of 1998, the economy grew 3.9 percent (the same as in 1997) while inflation rose 1 percent, the lowest since 1959. The GDP in 1998 was $8.51 trillion in current dollars.

NEW YORK (CBS.MW) -- It's just a matter of time before they officially change the name to the Internet public offering market. On Friday, two more Internet-related companies notched respectable first days of trading on the Nasdaq stock market. After strong openings, however, both stocks fell along with most of the technology sector. Shares of pcOrder.com (PCOR)
PCOR, +0.56%
jumped 124 percent after the company boosted the estimated pricing range of its 2.2 million share offering to $19 to $21, way up from the original $11 to $13 range listed on the company's IPO filing. PcOrder's stock opened for trading at 55 -- the price at which most investors were able to buy the stock -- and fell to 47 1/8 by the close of the session. More than 5.3 million shares changed hands. Also, Intraware (ITRA)
itra
managed an 18-percent gain on its U.S. stock market debut. The EarthWeb (EWBX)
ewbx
competitor priced its 4 million share offering at $16, above the estimated $13 to $15 range. Intraware gives software vendors the opportunity to let technical managers check out their programs. The company's services include tools to evaluate software, a procurement center, and a subscription service which customers can use to watch for software updates. Intraware shares opened for trading at 21 5/16 and fell more than 11 percent in trading of 7.3 million shares. CS First Boston led the deal.

The Japanese economy's reputation has taken quite a beating since the days, a decade or so ago, when we all wondered whether U.S. industry could keep pace with the Japanese juggernaut. "Now look," writes Steve Goldberg in a story on the Kiplinger.com site, going on to enumerate Japan's failings: a nine-year bear market, deflation, sky-high government debt, record unemployment and more. Goldberg notes that, with political leaders "genuinely worried," the fundamental changes that're needed may be afoot. He also provides names of a few stocks and mutual funds for investors who believe the time is right to "start tiptoeing into Japan now."

Full story Also see: Threats against wineries spread through California and Big Bordeaux merchant to go public, both from Wine Spectator. Plus, on his Internetstocks.com site, BancBoston Robertson Stephens analyst Keith Benjamin acknowledges that Net issues have outpaced the Nasdaq -- with the Netdex gaining 18.3 percent from last week, for example, compared with the Nasdaq's 2.9 percent gain, and up 486 percent from a year ago vs. the Nasdaq's gain of 31.7 percent over that period -- but he still sees value in the sector, especially among companies that produce business-to-business enabling technologies.

One firm could cash in on a silver rally. . .

SAN FRANCISCO (CBS.MW) -- If silver prices do benefit from shrinking supply, as a just-released report forecasts, one Canadian company's overseas expansion may put it near the top of the bullion heap. Pan American Silver Corp. (PAASF)
paasf
, fresh off a secondary offering that raised $22 million, operates the world's third largest silver mine -- at Dukat in Russia's far eastern province of Magadan. The Vancouver company is also growing operations in Mexico and Peru, note analysts in Seattle and Canada. Silver prices (SI=H9) are expected to rise this year after a 12 percent gain in 1998, according to an annual silver forecast from New York researcher CPM Group.

I was getting nervous about the market in my last column. I mentioned that that there were still plenty of individual issues that should move higher but that the market would become increasingly volatile. I still feel the same way about opportunities in individual issues. But the market has me a little more concerned. I think we have moved into a trading range environment versus the strong upward trending market that we saw last quarter. And from a stockpicking perspective, leadership has changed dramatically in the last month.

LOS ANGELES (CBS.MW) -- Few people on today's investment scene are as synonymous with growth stock investing as Bill O'Neil, president of institutional research firm William O'Neil + Co. and chairman of Investor's Business Daily. O'Neil has studied the U.S. stock market for more than 40 years. Markets Editor Kevin Marder caught up with O'Neil earlier in the week to see if he could make some sense of a confusing market. In a SoapBox interview O'Neil said, "We believe the market has gone through a normal, intermediate-term correction in the market averages. This can logically occur after the market's surprisingly strong run since October of last year."

LONDON (CBS.MW) -- Share buybacks and one-off handouts have been sweeping Britain recently as corporate results pour in. The list was topped by Unilever (UL)
UL, +1.28%
, the food and detergent producer, which this week announced an $8 billion-plus (or 5 billion pound) special dividend. Although share buybacks are a nice sweetener for shareholders, some pundits see clouds on the horizon if times turn bad and the companies see their fortunes deteriorate. John Hatherly, London-based head of research at the M&G Group, a fund management group, has been tracking the recent spate of buybacks and says it's all a matter of British companies following in the footsteps of their U.S. counterparts.

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